Rebalancing Strategies for Equity Portfolio Execution

As a portfolio manager for a large institutional investor, you are tasked with rebalancing an equity portfolio that has drifted from its target allocation due to market movements. The portfolio's current allocation stands at 70% domestic equities and 30% international equities, while the target allocation is 60% domestic and 40% international. You need to execute a trade to bring the portfolio back in line with its target allocation.

Given the current market conditions, you have the following execution strategies at your disposal:

• Algorithmic trading that can react to market conditions with various degrees of aggressiveness.
• Over-the-counter (OTC) trades with large liquidity providers offering better prices due to your volume.
• Traditional bid/ask trading on the exchange with the risk of market impact.

Discuss the advantages and disadvantages of each execution strategy in the context of minimizing trading costs and market impact while achieving the desired target allocation. Additionally, recommend which execution strategy you would select for this specific situation, justifying your choice based on the current market conditions and the specifics of the portfolio.